100% sale of dust-grade tea through auction: Dispur requests Centre to defer enforcement

Staff Reporter

GUWAHATI: The Assam Government has requested the Centre to defer for a considerable period of time the enforcement of the sale of 100 percent of dust-grade tea through auctions. The Union Ministry of Commerce and Industries notified the sale of 100 percent dust-grade tea through auction on April 1, 2024.

Various tea gardens and tea factories in Assam raised objections to the proposed sale of 100 percent of dust-grade tea through auctions.

Chief Secretary Ravi Kota, in his letter to the Union Ministry of Commerce and Industries, said, “As the tea industry in Assam comprises a large number of small tea growers and bought leaf tea manufacturers, the implementation of the notification is likely to create significant challenges, inevitable impacting the livelihood of tea growers and other stakeholders. We, therefore, request your kind attention to consider deferring the enforcement of the notification for a reasonable period. We urge you to issue appropriate orders on priority, keeping in mind the best interest of the tea industry in Assam and, more importantly, the welfare of small tea growers and associated stakeholders.”

The Union Ministry of Commerce and Industries issued the notification on February 23, 2024. The letter said, “One hundred percent of dust-grade tea is manufactured in a calendar year in its manufacturing units located in the geographical areas of the states of Arunachal Pradesh, Assam, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, West Bengal, etc., through public tea auctions held under the control of the organiser of the tea auction.”

Some of the objections raised by the tea growers in Assam are: (i) The basic principle objections then and now are that since the government cannot guarantee the price realisation and time taken for sale through auction, it should not intervene and should leave it to the producers who sell their produce in whatever manners they feel comfortable.

(ii) Tea producers have the huge risk and responsibility of paying wages to workers on time and also to small tea growers who sell their green leaves to tea factories. Therefore, managing the cash flow is a huge burden on producers. Any disruption or uncertainty in cash flow may invite social unrest and violence.

(iii) One of the major reasons for many producers not routing their produce through public auctioning is because this is a very inefficient mode of sales, it is time-consuming, and it is expensive.

(iv) Auctions are much slower compared to direct sales and much more expensive, and any rule that forces producers to sell through auctions will cause a working capital and cash flow crisis for the industry. Direct-selling teas can be sold within a week of production. In auctions, the minimum time is three to four weeks after production, and very often, even longer because 30 percent to 40 percent of the teas in auction remain unsold every week. If 100 percent dust-grade teas are made compulsory to be sold through auctions, then there would be an increase in the printing time that may go up to six to eight weeks, and thereby, it could cause huge cash flow stress for the producers.

(v) Most tea manufacturers purchase raw materials (green leaves) from small tea growers. These small farmers need to be paid on time. Sales through auctions may lead to a delay in the receipt of sale proceeds for the producers, who, in turn, will not be able to make payment to farmers on time. 

(vi) In the tea trade, teas fall into two categories: leaf and dust. The prices and demand for the dust grade of tea gain momentum after June. Therefore, it is likely that there will be huge amounts of unsold, dust-grade tea manufactured in April and May, leading to a huge pileup of stock in auctions and warehouses. This will lead to a panic situation at the beginning of the season, resulting in chaos in the market. Tea that remains unsold once in auction may mostly sell at a considerable low price, even below the cost of production in the next auction.

 Also Read: Assam: Small tea growers suffer after purchase of green leaf stops (sentinelassam.com)

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